Hardier Africa investors undeterred by Zimbabwe

LONDON (Reuters) - Zimbabwe's much-criticized election may put some cautious investors off Africa in general, but those already in the region are unlikely to be deterred.

The handful who piled into Zimbabwe itself ahead of and immediately after the first round of elections in March betting on an eventual end to President Robert Mugabe's rule and economic recovery are still hanging on, saying they are in it for the long haul.

Mugabe himself was in Egypt on Monday to being pressured by an African Union summit into negotiate with opposition leader Morgan Tsvangarai, who withdrew from Friday's ballot because of attacks on his supporters.

Having long remained quiet over economic collapse in what was once a prosperous country, African leaders and states including South Africa are now keen to express distance from Zimbabwe, some -- particularly in the region -- expressing worries trouble there might harm them.

"It has effects, particularly in terms of (foreign direct investment), because people are now classifying the region as unstable," Swaziland central bank governor Martin Dlamini told Reuters at a separate meeting in Switzerland.

"We actually lose out on any sort of possible investment... I want to emphasize that what is happening in Zimbabwe is nothing to do with the rest of southern Africa." he said.

Investors and analysts worry any further meltdown in the country could send even more refugees pouring into neighbors South Africa, Mozambique, Zambia and Botswana, raising already worrying social tensions and potentially draining coffers.

South Africa saw widespread xenophobic violence against migrants including Zimbabweans earlier in the year, and analysts say they could expect more of the same.

But ultimately, they say it will not make enough difference to change investment patterns in countries that have so far shown no signs of being dragged into Zimbabwe's hyperinflation -- officially 164,900 percent in February but with an estimated actual rate of 2 million percent.

In contrast, neighbor Zambia's inflation is 12 percent.

NO CONTAGION

"It simply will not have enough effect," said Veronica Kalema, director of sovereigns for ratings agency Fitch. "It will have some negative effect on the budgets of neighboring countries but not enough. It won't affect investment."

She said there was little chance events in Zimbabwe would affect South African, Namibian, Botswana or Mozambique and ratings. Other African economies further afield such as emerging favorites Nigeria, Kenya and Ghana would be completely unaffected, she said.

Investec Asset Management, which manages some $1 billion across Africa outside South Africa, said it would not be making any portfolio changes on the back of events in Zimbabwe.

"Economic contagion from Zimbabwe has so far been almost nil," said Investec portfolio manager Werner Gey van Pittius.

But he said that while the economic impact of chaos in Zimbabwe on neighbors was low -- and the impact on more distant African countries non-existent -- events there might color some investor perceptions towards the entire continent.

STAYING IN ZIMBABWE

"In reality, Africa is more democratic and more stable than ever before," said van Pittius. "But there is still a lot of Afro-pessimism out there and Zimbabwe does that no favors. People look at it and say Africa has always been a basket case and always will be."

Some analysts say the sight of African leaders criticizing Mugabe more openly -- even if they take no concrete action -- may help reverse that. Kenya's recovery from post-election violence earlier this year is also seen helping.

High global commodity prices, perceived greater political stability, few wars, better communications infrastructure particularly mobile phone networks and economic growth of around 6.5 percent have helped prompt new fund flows into Africa.

Zimbabwe itself has also seen something of an investment boom this year, with an estimated $150-250 million coming into the country from investors keen to buy cheap assets and position themselves for an eventual recovery.

Enthusiasm has since altered but those who have gone in say they are staying put and probably the largest investment fund, London listed LonZim says it still intends to raise another up to $100 million to fund new purchase.

"I've had no nervous phone calls from investors," said LonZim executive chairman David Lenigas. "Quite the contrary. There is a loss of enthusiasm for what LonZim is doing in Zimbabwe. But it is a very long-term exercise."

(Editing by Ron Askew)